Need to start credit

[saveandsave]

Hello,
I am 21 years old, live in NY, and I am interested in getting my first credit card. I am generally pretty good with my money but with all the credit card debt I have seen affect my family, it makes me kind of nervous. Nevertheless, I still think it is important to build my credit and make it good.

I guess my question is - where do I start? How do I know which card is good/bad/better? Does anyone have any suggestions?

[disneysteve]

Credit cards are not inherently good or bad. It all depends how you use them. The most important thing is to NEVER, EVER, EVER use a credit card to make a purchase if you don't already have the money on hand to pay the bill in full when it comes. You should never use a CC to buy something that you can't afford to pay for immediately. Stick to that one simple rule and you'll be fine. A good way to get started, I think, is to use the CC to pay bills that you would need to pay anyway like your auto insurance, cable bill, cell phone bill and other recurring charges that are the same every month and that you are already accustomed to paying.

As for what card to get, you want a card that pays some type of reward that is meaningful to you. Don't get a card that gives airline miles if you hardly ever fly. Cashback is always good as everyone uses cash. Try to avoid cards with an annual fee (though there are exceptions to that rule).

[maat55]

To add to Steve, attempt to keep your purchases to 30% or less(if you have a limit of 1k, do not use more than 300). And as stated, ALWAYS PAY IN FULL.

[clintdavis]

My question is why do you even want to flirt with danger by getting a credit card. You have seen first hand that credit card debt can literally hijack your life.

And understand, you don't NEED a credit score at all. You don't even need a credit score to get a mortgage. If you are nervous, it means your gut is on to something. Look around at all the broke people in our country who are in debt...and do the opposite of them!!!

Thanks for sharing!

[disneysteve]

My question is why do you even want to flirt with danger by getting a credit card. You have seen first hand that credit card debt can literally hijack your life.

And understand, you don't NEED a credit score at all. You don't even need a credit score to get a mortgage. If you are nervous, it means your gut is on to something. Look around at all the broke people in our country who are in debt...and do the opposite of them!!!

Thanks for sharing!

While I respect this opinion, I don't agree. There is nothing wrong with credit cards. There is a lot wrong with how some people choose to use credit cards. I have had a credit card since I started college in 1982. I have never paid interest. I have never paid late fees. I have always paid my balance in full every month. Learn to use a credit card properly and to your advantage and you'll be fine. No matter what Dave Ramsey says, there are many advantages to maintaining a good credit score. And you do not need to go into debt to get that good score.

[GREENBACK]

Credit cards are not inherently good or bad. It all depends how you use them. The most important thing is to NEVER, EVER, EVER use a credit card to make a purchase if you don't already have the money on hand to pay the bill in full when it .

DS, you and I are absolutely on the same page in terms of CC usage but I disagree with "NEVER, EVER". There are times in your life when opportunities pop up and you need fast cash to take advantage of them. If you're just getting started you may not have the resources. A CC can buy that opportunity. This assumes a responsible and disciplined person( can't be over emphasized) who plans on paying back any money borrowed. The above statement is from personal experience.

To the OP, Any major bank has a good credit card program for you. You can worry about rewards and all that stuff down the road.

I know that at 21 there is a big urge to party like a rock star with that first CC. Do yourself a favor and don't!

[clintdavis]

I understand and respect your position DS. But the facts don't support your position on credit cards. You have done a fine job of handling your credit cards. The majority do not. The majority of people do spend more when using credit cards than when using a debit card or cash.

According to the Journal of Experimental Psychology, consumers spend 10-20% more when buying with a credit card. You can find the study here: http://www.apa.org/pubs/journals/releases/xap143213.pdf

And this study by DRAZEN PRELEC AND DUNCAN SIMESTER of the Sloan School of Management at MIT, supports the same findings. - http://web.mit.edu/simester/Public/P...sleavehome.pdf

SaveandSave,

Don’t just accept conventional wisdom, and don’t blindly heed the advice of anyone. Think for yourself. Do your own research. When you hear somebody make a claim — even if it’s somebody you trust — seek independent verification before you make decisions based on the information.
The more you learn, the better you’ll be able to spot errors and fallacies and situations that don’t apply to you.

Remember: Nobody cares more about your money than you do. If you don’t take the time to double-check the financial advice you receive (in person, in books, and in forums and in blogs), then there’s a good chance you’ll end up in financial trouble. Be smart, and look out for yourself.

[clintdavis]

And another interesting finding in those studies...when people were making a decision on how much to spend on an item of subjective value (i.e. tickets to a sporting event, etc...), on average the test subjects were willing to spend 100% more when they were making the purchase with a credit card.

[MonkeyMama]

You will probably be limited in what kind of card you can get, with no credit history. I presume? Just get what you can, and go from there. Definitely, get a card with some reward if you can.

I wouldn't be scared of getting a credit card unless I knew I had self control issues (i.e. shopping addiction?). Treat it like cash. That is 99% of the battle, isn't it? If you "charge now and worry about paying later," then you get into trouble.

100% agree with Steve. I've had a credit card since I was 16. Almost 20 years? No troubles, since I simply treat it like cash, and pay the balance every month.

If you don't carry a balance, the cards are all about equal. Many will give you rewards. So, I usually shop for the best reward cards that fit my needs.

Actually, look for a card with no annual fee. I suppose that is one thing to look out for. Plenty of cards come with no annual fees. Read ALL the fine print.

[GREENBACK]

I understand and respect your position DS. But the facts don't support your position on credit cards. You have done a fine job of handling your credit cards. The majority do not. The majority of people do spend more when using credit cards than when using a debit card or cash.

Not to speak for Disney Steve but I've used credit cards most of my adult life and realize that they are a financial tool that can be abused by irresponsible users. Statistics don't make them bad. Irresponsible people make them bad. Use them like cash on hand and you won't have a problem. Use them as extended credit with a defined plan to pay them off and they are good. Use them like an idiot and get your just reward.

The problem with CC's is too many people behave like children with them. Like automobiles, firearms, alcohol or any other adult item they require grown ups to use them properly.

[disneysteve]

Ever hear of overdraft fees? They are charges levied by banks for people who spend more money than they have in their accounts, either by writing bad checks or overspending with their debit cards. Does that make checks and debit cards things people should avoid using? Of course not.

If you are going to be irresponsible, you are going to be irresponsible. It doesn't matter if you are paying by cash, check, debit or credit. Yes, I included cash in that list. Just because someone pays with cash doesn't mean they are being responsible with their money. It doesn't mean they aren't overspending. I guess we need to add cash to the list of things people should avoid using. See how ridiculous the anti-credit card argument becomes?

[clintdavis]

With all due respect Steve, read the studies. It DOES matter whether you are using cash, debit or credit. The brain registers the purchase differently when you use cash or debit versus credit.

I certainly DO agree that irresponsible people are going to act irresponsibly no matter the method of payment. Can you use credit cards responsibly? Of course you can. But the statistics show that the majority do not. They end up making bad decisions and the bad decisions are worsened by the use of credit over cash/debit.

To each their own...I believe that senitment. Everyone has to make their own decisions and do what they feel is best for them. And I always enjoy a good debate. Thanks DS.

[Mr Nice Guy]

I don't use my credit card too often, but have recently been using it more to separate business expenses from personal. I have just reached my first $25 with my wells fargo cash-back student CC. Once you reach multiples of $25, you can have wells fargo send you a check, or credit your account. I have no idea what all the fine print is, I might have to go check it. But wells fargo is an option for you, OP. The student package is a combo checking/savings/credit which is pretty tight.

Simply having a credit card available gives me the warm fuzzys inside. Not that i abuse it, I just like to have access to other people's money should the situation come up where it is needed, AKA leverage.

Disneysteve, I am suprised you have not stated the extra security carrying a credit card offers, as opposed to a check card.

[disneysteve]

With all due respect Steve, read the studies. It DOES matter whether you are using cash, debit or credit. The brain registers the purchase differently when you use cash or debit versus credit.

I certainly DO agree that irresponsible people are going to act irresponsibly no matter the method of payment. Can you use credit cards responsibly? Of course you can. But the statistics show that the majority do not. They end up making bad decisions and the bad decisions are worsened by the use of credit over cash/debit.

I have read the studies, and I don't doubt that some of their findings are true. I just don't agree that the studies are a reason to tell people not to use credit cards. Responsible people will act responsibly no matter what. Irresponsible people will act irresponsibly no matter what. You just have to know which type of person you are. Credit cards aren't for everyone for sure.

In 2009, banks earned over $38 BILLION dollars in overdraft fees. That's over 1.5 billion transactions at an average of $25/overdraft. And that's from people writing checks and using debit cards irresponsibly.

It is absolutely true that you can get into a lot more trouble with a credit card, so I'll agree with you there. Between our 4 cards, we have nearly 100K in credit available to us. If we lost our minds, we could go on one heck of a spending spree. With our debit card, we could only do less than 1/10 of that damage.

[BudgetMath.com]

Hello,
I am 21 years old, live in NY, and I am interested in getting my first credit card. I am generally pretty good with my money but with all the credit card debt I have seen affect my family, it makes me kind of nervous. Nevertheless, I still think it is important to build my credit and make it good.

I guess my question is - where do I start? How do I know which card is good/bad/better? Does anyone have any suggestions?

saveandsave: If you're concerned about abusing your credit card, you should look into getting something called a "secured credit card". A secured credit card is backed by your savings or checking account and used as collateral on the credit available with the card. Money is deposited and held in the account backing the card.

Using this kind of card will completely prevent you from spending money you don't have. It's a great way to get used to having a real credit card. And they also build up GOOD CREDIT on your credit report! They actually get reported to the 3 credit bureaus the same way as a real credit card does.

So this would be a great first card for you. The most convenient way to get one would be to contact your current bank. That way, linking the secured card to your bank account will be much easier.

Good luck!